FLUOROCHEM — earnings call
The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.
Prepared remarks
FLUOROCHEMICALS LIMITED. · MR. DEEPAK ASHER -- DIRECTOR & GROUP HEAD
MR. DEEPAK ASHER -- DIRECTOR & GROUP HEAD (CORPORATE FINANCE), INOX GROUP OF COMPANIES.
MR. V.
K.
SONI -- HEAD (PROJECTS & NEW
Moderator · Conference Operator
MS. MILONI BAGADIA – IDFC SECURITIES LIMITED Gujarat Fluorochemicals Limited July 30, 2020
Ladies and gentlemen, good day and welcome to the Gujarat Fluorochemicals Limited
Thank you very much.
We will now begin the question and answer session.
First question is from the line of Rohit Sinha from Emkay Global.
Please go ahead.
Rohit Sinha
Thank you for detailed presentation.
So just wanted to know, which are the industry we are serving through our new Fluoropolymers and Fluoro Specialty Chemicals and how is the traction you are observing in last maybe six to eight months or the recent time?
Gujarat Fluorochemicals Limited July 30, 2020
Vivek Jain
Well, I’ll take this question.
There’s a diverse segment of industries in which our new Fluoropolymers are used and that have been listed down in the presentation and it has taken some time to develop the grades which are required by these various segments and get customer qualification.
As we have pointed out a number of times in the past a this is a very painstaking task and the time it takes is something, sometimes quite unpredictable.
Things are now getting back on track, we have been able to get, we have been able to develop most grades which are required under the different categories of Fluoropolymers.
Some of them have been or , most of them have been approved.
Commercial sales have also started from some of the product categories and qualifications is continuing for others.
Unfortunately in the last four months because of COVID the momentum which has been built in getting customer qualification got stalled.
And, this is a process which has been initiated again.
But at this point of time, many of the users are finding it difficult to start new qualifications, because they have an inadequate manpower in the labs.
And while they are all very very keen to start the process, continue on with their process of qualification it will take another one or two months for further qualifications to happen.
At this point of time, actually, unfortunately, Europe for instance, also enters into a holiday season and despite COVID it seems that both in July and August, there are a lot of European companies who will be on vacation so we expect further improvements to start happening from September onwards.
Rohit Sinha
Okay.
So, these all are largely domestic export or how we see the mix on these segments?
Vivek Jain
No most of these products will be for exports because they are used in very high end industries.
The domestic market for one of the products would be almost about 33% to 40% for the other products it will probably be around 15% most of the balance quantity will be required for exports.
Rohit Sinha
Okay, so largely it’s from the export side, fair enough.
Sir, next question would be on the PTFE side, what is the current price and what it was a year ago and how you are seeing that maybe what are the major dynamics which will impact the prices of the PTFE?
Vivek Jain
Deepak would you have the prices now and then?
Deepak Asher
Yes, we locked in average price of about Rs.
6,71,000 per ton in Q1 of FY21 and this was about Rs 6,99,000 per ton in Q1 of FY20. So, the prices are between 670 to 700 this is weighted average for both commodity grade and value added grade.
Rohit Sinha
Okay.
And what are the dynamics which will be basically impacting the pricing of these?
Vivek Jain
To some extent prices are a bit subdued just now because of the fact that there has been a slowdown in demand.
And for instance, currently we are at about 70-75% capacity utilization and we still have to go to 100% we were expecting that by now, we would have been in that 100% capacity utilization.
But, because of the slowdown which happened because of COVID.
Gujarat Fluorochemicals Limited July 30, 2020 So, our current estimation is that by beginning of next Financial Year maybe of April, May we should get back to full capacity utilization and by that time demand from most sector will also go up.
So, we expect that the prices will remain stable if not marginally improved.
Rohit Sinha
Okay, fair enough.
So, next would be on the Chloromethane side.
So as we see, what is the current demand in this segment and how this made in India or maybe Aatma Nirbhar Bharat will be impacting the demand as we recently, today only, SRF has also announced the CAPEX of Rs 315 crores in this segment.
So, how would be the competition in this particular segment?
Vivek Jain
Well, it’s very difficult to project the situation two years from now, because there is some more capacity which is coming up and while the demand is also growing.
So, I suppose there should be some room for additional capacity to come up.
Rohit Sinha
So, largely demand is from pharma side?
Vivek Jain
Largely from the pharma side.
Rohit Sinha
Okay.
And any number you can give to the kind of growth we are seeing in this provision side?
Vivek Jain
See, it’s been growing by about 10% per annum.
Rohit Sinha
Okay.
Last question from my side on this R Gas side.
So is it any of future plans to introduce new product in R Gas or we will stick to this 102 and 125?
Vivek Jain
Sorry, I didn’t get your question right?
Rohit Sinha
So, in Refrigerant Gas segment what are the future plans for adding new Refrigerant Gas product maybe?
Vivek Jain
At this point of time we do not plan to put up any new CAPEX on R Gas because we still want to watch and see how the demand for 1134YF, which is actually the future replacement, is going to build up.
We have not gone in for R 32 because we think it’s a commodity chemical, and there’s no value which we’ll be able to bring to the table.
So it’s largely dependent upon what China does, and if China has got huge capacities.
So we are watching and seeing.
For 1134YF we have an intermediate which we currently produce.
And depending upon the situation if we find that the future demand permits, we may forward integrate into 1134 YF from there.
Gujarat Fluorochemicals Limited July 30, 2020
Moderator · Conference Operator
Thank you.
The next question is from the line of Rohit Nagraj from Sunidhi Securities.
Please go ahead.
Rohit Nagraj
Thanks for taking up question, In terms of margin if we were look at how the segment stack up so, we have predominantly six segments.
So, which are all are they having in terms of higher margin to lower margin?
Deepak Asher
We can’t hear very clearly could you please, speak a little bit louder.
Rohit Nagraj
Sir we have six segments and in terms of margins how do these segment stack up.
Basically currently Caustic Soda margins will be at the bottom of each segment, but otherwise for all the other segments, which is having the highest margin and how it percolates down?
Deepak Asher
Sir first of all, ours is an integrated value chain.
So, the end product of one plant becomes the raw material for the other plant and hence, we don’t really measure margins for each segment individually for the reason that these margins could be influenced by transfer pricing policies.
So it depends on what price you transfer finished product of one plant as a raw material to the other plant.
And secondly, because it’s a common manufacturing facility, a lot of overheads are common across all the plants and hence, we don’t really look at, and we never have looked at, margins on a per plant basis, but suffice to say that as of now, most of our growth going forward is going to come from the value added PTFE, from the new Fluoropolymers and from the Fluoro Specialty Chemicals and these three segments clearly have a margin profile which is better than the average margin of the company and hence, there should be an improvement in the overall margin profile of the company because of the churn in the product mix or the segment mix in favor of the higher margin products.
Rohit Nagraj
Yes, that is quite useful.
So in terms of margin trajectory, what would we look at as sustainable margins when everything stabilizes maybe over a period of two to three years?
Deepak Asher
Well again, we tend not to give you quantitative kind of projections going forward.
But historically, if you see a FY19 we ended it at an EBITDA margin, if I remember right of about 30%.
We don’t think it is inconceivable to reach those kinds of levels going forward.
Rohit Nagraj
Sure.
Sir on the Fluoro Specialty side, we have mention that we have seven products.
So could you just give us an understanding of which user industries are these catering to and are these going into some patented product application or non-patented product applications?
Vivek Jain
Well, currently if you look at volume mix, sales mix 60% would be pharma, 40% will be agro.
Gujarat Fluorochemicals Limited July 30, 2020
Rohit Nagraj
Okay and in terms of whether these products are going into patented product because probably in terms of growth, the patented products may have higher growth than the generic products?
Vivek Jain
See, this is difficult for me to answer that question.
V K Soni
Basically the products are going not as API’s or as the end product.
So they are intermediate, so they is no patenting, since patenting normally is for the end products.
Rohit Nagraj
Right.
Thank you.
Sir and in terms of CAPEX plans what would be our CAPEX plans for this year and next year, maybe we don’t have any specific capacity expansion plans, then what would be the maintenance CAPEX?
Vivek Jain
No, see the point is we will have some additional capacity will be coming up in the Fluoro Specialty area from now till, if you look at for quarter profile for now, we have investment plans of maybe about 300 crores plus.
There are several products which have been developed and they are just now evaluating the prospect of putting up CAPEX behind those, some of them seem to be very good opportunities.
So, maybe in the next one to two months, we will finalize have finalized our plan and then will move forward with implementation.
And time being, as far as Fluoropolymers, the New Fluoropolymers is concerned, we have made all the CAPEX which are required for current capacities and we don’t intend to put in any further CAPEX at least for the next one and a half years in Fluoropolymers.
Rohit Nagraj
Alright, thank you sir.
Sir last question on the chlorine front.
So how have the prices behaved in the recent quarter and how much do we consume captively?
Vivek Jain
Which product?
Rohit Nagraj
Chlorine
Vivek Jain
We consume 100% of our Chlorine captively.
The pricing of chlorine in the external market really don’t concern us because we captively utilize all the Chlorine which we produce for Chloromethane.
Moderator · Conference Operator
Thank you.
The next question is from the line of Ritesh Chheda from Lucky Investment.
Please go ahead.
Gujarat Fluorochemicals Limited July 30, 2020
Ritesh Chheda
Sir, a few questions on your CAPEX side.
So the Specialty Fluoropolymers, where we mentioned that it’s a 30% and 35% utilization, what is the capital expenditure that we did and what is the asset turn possible there?
Vivek Jain
I don’t know.
I don’t have those numbers readily.
Ritesh Chheda
Okay, at full utilization what will be the Revenues there?
Vivek Jain
Okay, maybe I can give you a idea about that and full capacity utilization our, about New Fluoropolymers will be about Rs 750 crore, they’re about but, I could be a bit wrong.
So broadly speaking it could be about Rs 700 to 750 crore.
And in the Fluoro Specialty for the investment, which have been put up, uptill now it could be about Rs 600 to 700 odd crore.
Ritesh Chheda
And any educated guess on the asset turnover or the CAPEX number you would have spent there both places?
Vivek Jain
I don’t have the numbers readily with me.
Ritesh Chheda
Okay.
Second, but will it be more than two time asset turn?
Vivek Jain
It will probably be about two times in both these two segments.
Mr Soni., I would be right in saying this?
V K Soni
Yes, roughly about 400 crore CAPEX would be in the spec Chem.
So it is about two times and same is for New Fluoropolymers.
The reason is that all the backend integration capacities have already been set up and we are only adding the value added the front ends.
So the CAPEX is much less.
Ritesh Chheda
Okay.
And second question is observation.
So, when I look at your EBITDA across the three time periods which have been posted in the presentation, there’s a significant drop versus the top line.
So, qualitatively is this to do with the pricing of PTFE and what happened in Caustic Soda pricing, the key reason for the drop, or do you want to highlight another reason?
Vivek Jain
Substantially that is what happened Caustic Soda pricing at that point of time, Caustic Soda was a relatively larger proportion of our sales.
So, that went down quite steeply and as you mentioned, there was a decline both in PTFE prices also as mentioned almost about Rs.700 it went down to about Rs.670 so there was a margin decline in PTFE price also.
And, of course in the last quarter which is January, February, March last quarter of the previous Financial Year.
Almost about 15 days of sales were lost because of the lockdown in the second half of March.
Gujarat Fluorochemicals Limited July 30, 2020
Ritesh Chheda
This price which you mentioned of 670 versus 700, that is for quarter four specifically or that also valid for the full year of FY20?
Deepak Asher
No, so the PTFE prices that I gave was for the last quarter.
Q1FY21 compared to Q1FY20.
Ritesh Chheda
Q1FY21versus Q1FY20?
Deepak Asher
No, it’s actually Q1 for the financial year ending 21.
So, yes April to June 20.
Ritesh Chheda
Yes, it is current quarter versus last quarter?
Deepak Asher
That’s correct.
Vivek Jain
I just wanted to add one more, last Financial Year.
As we all know that there has been a huge erosion of demand in the automobile sector.
And this was not only true for India but also, even US and Europe.
There was a big slump in the automobile industry, a lot of our products were going into the automobile industry almost about 20 to 25%, if not more goes to the automobile industry.
So because of the fact that sales went down because of the slack in the automobile industry, there was a pressure on prices also.
So prices also went down to that extent.
Ritesh Chheda
Lastly, I want to understand what would be your debt repayment over the next two years what would be your maintenance CAPEX and growth CAPEX, if any?
Deepak Asher
So, as I mentioned we expect to pare down our debt levels considerably.
This is at about Rs 1600 crores now, what we expect is a reduction because of the income tax credits that we expect in fact, we as you might have noticed, we expected about Rs 300 crores of income tax refunds to come in of which we have already received a Rs 230 crores, another Rs 70 crores is expected over the next fortnight or so.
So, Rs 300 crore debt reduction will happen because of income tax refunds.
We expect another about Rs 300 crores to happen out of operating cash flows for the rest of the year, financial year and maybe another about Rs 200 crores from optimization of working capital.
So, in essence about Rs 800 to Rs 900 crores of debt to be reduced from the current levels of about Rs 1600 crores which will bring it down to about Rs 800 crores versus we have about Rs 370 crores, say Rs 400 crores of cash or financial assets.
So, our net debt by the end of this Financial Year should be around Rs 400 crores if things go as planned and obviously by end of the Financial Year 22 we should be at net zero debt company.
Ritesh Chheda
And what will be your growth CAPEX and maintenance CAPEX over the next two years?
Deepak Asher
As it was earlier mentioned also by Mr. Jain, I believe and I also covered in my presentation we expect CAPEX of about Rs 300 to Rs 350 crores in terms of some of the Fluoro Specialty Chemical lines that we have identified.
Most of the CAPEX is for the existing product lines Gujarat Fluorochemicals Limited July 30, 2020 have already been incurred and maybe will incur some kind of nominal maintenance CAPEX of about Rs 50 crores to Rs 100 crores going forward.
Ritesh Chheda
So, this 350 is for two years or this is a one year number?
Deepak Asher
So, over the next few quarter.
I guess it will be over the next few years or so.
Ritesh Chheda
Next year, and lastly on your Rs 3600 crores block that I see in the presentation across the net block.
I don’t know the gross block number as of now, but what kind of peak revenues is possible on that kind of asset that you have?
Deepak Asher
So, if you assume that all the plants were to run at full capacity we could see a total top line of about Rs 4200 to Rs 4400 crores at current prices.
Ritesh Chheda
Okay.
On our gross block number, what would be the gross block number there?
Deepak Asher
The gross block number would be what it is currently, which is about Rs 3600 - Rs 3700 crores.
Again, just to further clarify on that you might not see a significant asset turnover, but that’s because most of the plants are even integrated manufacturing chain, which go in reducing costs rather than improve in turnover.
So our EBITDA margins therefore would be, again at full capacity at current prices.
Assuming a 30% EBITDA margin that will be about Rs1200 crores of EBITDA on a gross block of about Rs 3500 which is almost like a 35% of gross block EBITDA.
Ritesh Chheda
Okay, at peak, so Rs1200 crore EBITDA?
Deepak Asher
That’s right yes.
Ritesh Chheda
And you’re net working capital target, the net working or the cash conversion cycle that one should look at would be what in days or whichever we as a percentage?
Deepak Asher
The target of course is to bring it down by 75 days, but to be conservative one could look at about 90 days of working capital.
Moderator · Conference Operator
Thank you.
The next question is from the line of Aman Morya from Alpha Accurate Advisors.
Please go ahead.
Aman Morya
Thank you for opportunity.
My first question is on the Specialty Chemicals side.
Currently we are already having a 35% of utilization level and we are planning something around Rs 350, to 400 crores kind of a CAPEX into that.
So, what is the rationale are we seeing so good traction into that and how the revenue trajectory looks into this particular vertical?
Gujarat Fluorochemicals Limited July 30, 2020
Vivek Jain
Just now we were 35% as I have been mentioned because there was a, because of the impact of April, May, June quarter where we got actually badly hit because of both manpower availability in the particular site in which we currently make Fluoro Specialty and also some supply chain issues also.
But by September, by the end of this quarter by September, October, we intend to get to almost a 90% capacity utilization of our current product, for which capacities are already setup.
We are in the midst of putting up capacity to another six products which get commissioned by October end and the sales revenue from those will almost at full capacity by March of next year.
So, that is the reason why this investment which is currently on, will be taken care of, what we are talking about Rs 300, 350 crore is breaking it beyond these 13 products, which have already been there, which are already work in process.
So, that we will do, that investment will get fructified maybe about 12 to 15 months from now, and which will then add further to our revenues.
Aman Morya
Okay, sir.
One clarification, last participant you had mentioned that even in the current gross block you can reach to a Rs 700 crores kind of peak revenue in Specialty Chemicals correct.
And, on top of this Rs 350 crores can bring additional Rs 700 crores?
Vivek Jain
I don’t have the numbers offline but yes, they would probably be about in the region of between Rs 400 to 500 crores.
I don’t have the numbers but those, because we are still in the process in the midst of finalizing the exact plan for the Rs 350 crores CAPEX.
Some of that will actually also get utilized as the intermediate in the products which we make.
So, it will be difficult for me to give you an exact number on the turnover it will generate.
Aman Morya
Okay, so 500 plus, to 700 is the fair number, right.
I’m saying, I’m not considering two times kind of a asset ratio but current capex?
Vivek Jain
Off the cuff once the Rs 350 CAPEX is also implemented, I would say it would result into a turnover about Rs1200 crore.
Aman Morya
Sorry, how much?
Vivek Jain
Rs1200 crores, Rs 700 plus 500 crore this could result into a 1200 crores.
Aman Morya
And this piece of your business would be sir like your average margin, how much higher than your average company level margin?
Deepak Asher
Again, we may not want to get into specific margins for each of the segments going forward but it would as I mentioned be materially higher than our current average margin.
Aman Morya
Okay, so like 300 basis points, 400 basis points, 500, because this is the key segment which will drive your margin going forward.
That is the reason I’m asking?
Gujarat Fluorochemicals Limited July 30, 2020
Deepak Asher
No, I understand but as I say, we hesitate to make futuristic quantitative predictions, except just say that it should be fairly strong, fairly healthy as compared to what our current profile is.
Aman Morya
Okay.
And sir second question is on the Fluoropolymer, Fluoropolymer is also having 30% utilization currently.
So, first thing is this, is the Fluoropolymer revenue drivers are same or they are different?
Vivek Jain
Sorry which?
Aman Morya
Fluoropolymer currently we are having 30% utilization for Fluoropolymer and we expect that even in that particular segment we can reach to 700 kind of a peak revenue and I am just trying to understand in that particular business, the revenue dynamics or the competitive dynamics are similar of the PTFE or it is different?
Vivek Jain
No, it could be different, different in different segments.
It is because that end use applications could be different for these products, then what we do.
Aman Morya
Okay, so you are not saying like, so in this particular segment you’re not competing with China or you’re not competing with other Asian players?
Vivek Jain
There are other Asian players, there are competing, but they are at the lower end of those particular products.
So, when we are exporting it out to US and Europe we are not really competing with China.
Aman Morya
Okay.
And sir then in your PTFE.
How the traction looks because one that we are already having an anti-dumping duty in India, for the China made PTFE followed by that, US have anti-dumping duty on China, which is pretty much heavy.
So in that current dynamics, are we not benefiting from the China plus one strategy both in Europe and US?
Vivek Jain
Yes, we are to a certain extent, but as I mentioned our exports to the US are not the grades where the Chinese are predominantly present in.
So, maybe about 10-15% of our exports to the US actually directly competes with the Chinese.
So, in the US the imposition of duty on China helps us in certain segment, but the larger segment is more in the value added product for the Chinese present in any case.
Moderator · Conference Operator
Thank you.
The next question is from the line of Paras Nagda from Enam Holdings.
Please go ahead.
Paras Nagda
So sir, my question was on the energy cost, we are putting up captive wind power asset, Sir I wanted to understand how much megawatt are we planning to install and what is the timeframe that it will be installed by and is it going to be a 2 megawatt machine or a 3.3 megawatt machine, the new 3.3?
Gujarat Fluorochemicals Limited July 30, 2020
Deepak Asher
So the total capacity is about 125 megawatts.
3.3 megawatt turbine, the timeframe would be they’ll commence installation by next January and hopefully complete the project by next June or so.
In terms of economics, we look at our current cost of outside power, bought out power, it is about Rs.8 per unit.
Even if you remove the standing charges out of it it’s about Rs.7.5 per unit of variable cost and our internal cost of generation along with depreciation would be less than Rs.2 per unit.
As a result of which there will be a significant cost savings in absolute terms, anywhere between Rs 200 to 230 crores per annum.
Paras Nagda
Okay.
And sir how much are we paying for this 125 megawatts ?
Deepak Asher
Should be roughly about Rs 800 to 850 crores.
We don’t have a figure off hand but around that.
Paras Nagda
Okay.
And sir what is the kind of payback you are expecting if it is a Rs.6 tariff differential that we are talking about?
Deepak Asher
So, as I said it could be a payback of about four years.
Paras Nagda
Four years payback, okay.
Deepak Asher
Apart from the fact of course that is also gives you insulation against future cost escalations in power, all this is computed at our current power tariffs, and as you know power tariffs could possibly go up in the future.
So, it also gives you insulation against cost increases.
Power as you know comprises of about 20% of our costs, 20% of sales is power cost so, it’s a significant cost reduction for us.
Moderator · Conference Operator
Thank you.
The next question is from the line of Dhruv from HDFC AMC.
Please go ahead.
Dhruv
Sir just a clarification to some of your previous points, sir the New Polymer revenue potential we mention was about 700 to 750 and if I am correct, current revenue is about Rs170 odd crore in FY20. So, that could go to about Rs 700 odd crores right?
Vivek Jain
Yes.
Dhruv
And similarly for the Spec Chem it is currently it is about 180 odd crore which should go to about 600 odd crore in the current capacity.
Deepak Asher
Broadly yes.
Dhruv
Sir and what time frame do you think that this could play out two years, three years just to reach the full potential?
Gujarat Fluorochemicals Limited July 30, 2020
Deepak Asher
Possibly in the next two years.
Dhruv
Two years at least.
And sir second question was on the polymer side, earlier you mentioned that a new polymer and also your PTFE basic value add grade also requires approval from clients.
So, I was just wondering how does this chain work, the customer approves you and then is it that you are the only supplier to the customer or probably you are of the one or two supplier and it gives you volumes or then an open market and you are among say 5, 10 suppliers to them and they choose based on pricing.
So how does the chain work?
Deepak Asher
Maybe you can move on to the next question and then we’ll come back to this once Mr Jain joins in?
Dhruv
Yes, sir.
I had another question on the Spec Chem side, looking at your revenue growth over the last two, this comparing versus FY19 to FY20 despite being a difficulty year, you have a decent growth in Spec Chem although of a lower rates and you expect in next two years to reach a decent level - at least Rs 600 odd crore.
I also see some of your competitors are also quite excited about these Spec Chem business particularly from agro and pharma.
So anything you can highlight what is happening there.
What kind of growth that we are seeing what is driving it, any sense from that, just to understand this will give more confidence on the growth cycle that we are in?
Vivek Jain
Yes.
So, Deepak shall I answer?
Okay, let me do that.
One thing for sure is happening is that, there is a move, of course in India, as well as globally also, people are looking at de-risking from China.
So, that itself is throwing some new opportunities for companies like us and we are at this point of time only concentrating on the Fluorine chemistry point of view.
Later on there could be opportunities for us to go to other chemistry which are not fluorine based because, frankly speaking the building blocks are the same, and as we move forward we will be looking at other chemicals which are beyond the fluorine chemistry.
So that’s one which is happening which is throwing up opportunities.
Secondly, even big overseas company also specially the agro chemical field they are also looking at de-risking from China.
So you see some opportunities coming up from there also.
And of course in the pharma field the presence of fluorine increases the efficacy of medication so you are seeing increasingly number of pharma products which were containing containing Fluorine.
So, for all these three reasons you are seeing growth in demand and elsewhere in the developing world.
You don’t see capabilities so wide capability in the specialty chemical field as exists in India.
So, it’s only natural much of the demand will start coming into India and so that’s one of the primary reasons why this sector will perhaps continue.
Gujarat Fluorochemicals Limited July 30, 2020
Dhruv
Got it sir.
This de-risking from China.
So, that respectively means that they continue to get it from China the molecules and also are looking at buying from India that is the, so they have two suppliers now, that is the strategy?
Vivek Jain
They are de-risking so, I would say that will be true for everybody unless and until for instance in India there is a government restriction to import from China and of course, they will have to look at sourcing with developing the sources within India itself.
But, even if that is not so, given the fact that there has been a lot of disruption which has been caused by China, people would look at de-risking and having at least one leg in the Indian camp.
Dhruv
Sure.
Sir just one thing on this, just to getting your thoughts on this.
So, for example current Chinese capacities which was producing this will be will be suffering and at some point in time if they start selling under pressure and have a significant price correction, versus that we are producing or some of our other pre player also producing, cannot be a big risk to the growth trajectory that we have?
Vivek Jain
Sorry, I didn’t get your question right, I was not able to get it right.
Dhruv
Sir, I was wondering that if say for example, the Chinese are also supplying and you are supplying and Chinese capacities will be underutilized because they are, the buyers have shifted some of their consumption to say India or some other country.
Now, Chinese will also be under pressure because the capacity is underutilized and probably will start cutting on pricing.
So, can that be a big risk to the whole thing that we are looking for the particularly for our task in terms of Specialty Chem?
Price competition could be a risk?
Vivek Jain
It could happen I mean Chinese, if they want to sort of create a problem in any sector, they always can do it.
So, but at the same time, as we just mentioned that a lot of the companies would like to de-risk.
So even if the Chinese try to actually lower, there would be a certain proportion of the demand which will come to Indian producers because it’s not only about price differential, it is also about the security of supply.
Dhruv
Got it.
And sir just one last clarification is, you mentioned the debt number that the debt should decline significantly, but on a later comment you mentioned that you’re investing about Rs800 crores for the wind project.
So that could come in the Rs800 crores CAPEX will come in the next year right in FY 21.
So that will be an offset to the debt decline that we are looking at?
Vivek Jain
Deepak are you there?
Deepak Asher
Yes, I am there.
But sorry I couldn’t hear what was said.
Gujarat Fluorochemicals Limited July 30, 2020
Dhruv
Sir, I was mentioning that you mentioned that debt reduction should happen in this year and next year too.
But later in the comment you mentioned that there would be a wind CAPEX of about Rs 800 odd crores to reduce your cost.
Deepak Asher
It’s already paid out.
So there’s no additional outflow because of that.
Dhruv
Okay, great so Rs 800 crores is already the CAPEX is already done, just the cost gain that will come now?
Deepak Asher
That’s already contributed there is no cash outflow because of that.
Moderator · Conference Operator
Thank you.
Ladies and gentlemen, due to time constraint will take that as a last question.
I would now like to hand the conference over to the management for closing comments.
Deepak Asher
Well as always, I’d like to thank you for your interest in the company and I look forward to your continued participation on these earnings update calls.
And I look forward to your support as well.
Thank you.
Vivek Jain
Thank you all, thank you very much.
Moderator · Conference Operator
Thank you.
On behalf of IDFC Securities Limited, that concludes this conference.
Thank you for joining us and you may now disconnect your lines.
Questions and answers
Corporatt
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